The hammer price is the number the auctioneer calls. The buyer's premium is the number you actually pay on top of it. It is not a hidden charge — it is published in the sale's terms — but it is the single most common surprise on a first auction invoice.
What it is
A buyer's premium is a percentage of the hammer price, charged by the auction house to the buyer. If the hammer falls at £1,000 and the premium is 20%, the premium is £200. The invoice starts at £1,200 before VAT, fees and delivery.
It is separate from the seller's commission, which the house charges the seller. The two together are how an auction house is paid for cataloguing, photographing, marketing, running the sale, taking payment and handling collection.
Why it exists
An auction house carries costs before a single lot sells: photography, cataloguing, condition reports, premises, staff, insurance, payment processing and the platform that runs the bidding. A premium spreads those costs across the buyers who use the service, rather than loading them all onto the seller as a larger commission. It also aligns the house with the result: a higher hammer means a higher premium.
How the arithmetic works
For a lot hammered at £1,000, with a 20% premium and VAT at 20% on the premium:
| Line | Amount |
|---|---|
| Hammer price | £1,000.00 |
| Buyer's premium (20%) | £200.00 |
| VAT on the premium (20%) | £40.00 |
| Subtotal | £1,240.00 |
| Online bidding fee, if the sale charges one | varies |
| Delivery, storage or export costs | varies |
That is an illustration, not a statement of any particular house's rate. Premiums commonly sit between 15% and 30%, and they can be tiered: a lower percentage on the part of the hammer above a threshold. Always read the specific sale's terms.
The VAT detail that catches people out
In the UK, VAT is usually charged on the premium, not on the hammer price, because the hammer price for second-hand goods is often sold under a margin scheme. Some lots are different: imported goods, new goods, or a sale where VAT is due on the hammer as well. The catalogue or the sale terms will say when a lot is sold with VAT on the hammer.
If you are buying as a business and can recover VAT, ask for a VAT invoice that shows the treatment clearly. If you are buying privately, the VAT on the premium is simply part of the cost.
Online bidding fees
Many houses and platforms add a separate fee for bidding online or by telephone, often around 3% of the hammer. Some absorb it into the premium; some waive it for absentee bids left before the sale. This is why two houses with the same headline premium can cost different amounts for the same hammer price.
The cheapest way to bid is not always the most convenient. If a sale charges 3% for live online bidding but nothing for an absentee bid left in advance, leaving a maximum can save you money — provided you are happy for the system to bid on your behalf.
Estimate, reserve and premium are three different things
- Estimate — the auctioneer's opinion of what the lot may make. A guide, not a price.
- Reserve — the lowest price the seller will accept. Usually confidential, and often set near the low estimate.
- Premium — the fee you pay on top of the hammer. Nothing to do with either of the other two.
A lot can fail to reach its reserve and go unsold even though the bidding reached the low estimate. That is not a malfunction; it is the reserve doing its job.
Working out your real maximum
Start with the most you are willing to pay in total, then work backwards. If your ceiling is £1,000 and the premium is 20% plus VAT on the premium, your maximum hammer is roughly £806: £806 + £161.20 premium + £32.24 VAT = £999.44. Add delivery and any online fee, and the hammer you can afford is lower again.
Doing that sum before the sale is the single best defence against auction fever. The bid button shows the hammer, not the invoice.
Questions people ask
Is the premium negotiable?
For an ordinary buyer, almost never. It is a published term of the sale. A trade buyer with a volume agreement may have different terms, but that is arranged in advance, not at the rostrum.
Do I pay it if I do not win?
No. The premium is charged only on lots you actually buy.
Is it charged on Buy It Now lots?
Usually yes, if the sale's terms say so, but fixed-price listings can differ. Check the lot and the terms rather than assuming.
Why is the invoice higher than the estimate?
Because the estimate describes the hammer price, and the invoice adds the premium, VAT on the premium, any online fee and any delivery or storage. Those are separate lines, not a hidden increase.
The short version
Read the premium before you bid. Add VAT on the premium. Add any online fee. Add collection. Compare houses on that total, not on the headline percentage alone. Then set a maximum you would still be pleased with once the invoice arrives.